“Pay No Attention to the Inflation Behind the Curtain”

Case in point: during the speech delivered by Chairman Powell, he made a rather odd statement (emphasis and paragraph breaks ours):

When longer-term inflation expectations are anchored, unanticipated developments may push inflation up or down, but people expect that inflation will return fairly promptly to the desired value. This is the key insight at the heart of the widespread adoption of inflation targeting by central banks in the wake of the Great Inflation.

Anchored expectations give a central bank greater flexibility to stabilize both unemployment and inflation. When a central bank acts to stimulate the economy to bring down unemployment, inflation might push above the bank’s inflation target. With expectations anchored, people expect the central bank to pursue policies that bring inflation back down, and longer-term inflation expectations do not rise. Thus, policy can be a bit more accommodative than if policymakers had to offset a rise in longer-term expectations.

Basically, the Fed Chairman is stating that it’s okay for inflation to keep rising the way it has since 2015. Why?

The magic of “anchoring” a fixed target will automatically bring that inflation back down. Robert Wenzel reveals the insanity behind this thinking in the same piece on Economic Policy Journal:

In other words, he made the twisted logical claim that, even if price inflation rises a bit, price inflation won’t rise because the Fed has “anchored” price inflation expectations.

I note he is making this absurd claim despite the fact that price inflation on an annual basis bottomed in early 2015 and has been climbing ever since and is currently well above the Fed’s “target” rate of 2.0% at 2.8%.

During the “Great Inflation” that lasted into the early 80’s, the Fed ignored the reality of the unemployment rate, and inflation soared over 12% (see chart below):

Now, the Fed seems to be repeating history while ignoring the multi-faceted reality right under their noses.

So it’s entirely possible inflation could soar again, and show us all that the inflation “behind the curtain” is much bigger than it appears.

Wenzel even makes a stark prediction of a possible rapid spike in price inflation to the 5.0% range within the next 6 to 12 months. If it verifies, this tells us the U.S. is well on its way to repeating the 80’s.

And don’t forget, the Fed doesn’t like to report the “real” inflation rate that indicates the U.S. economy is already in a death spiral.

Roll over all or a portion of your IRA or 401(k) into a Precious Metals IRA. Talk to one of our Precious Metals Specialists today about how you can open a Gold IRA or Silver IRA, or how you can buy silver or gold coins and bars for physical possession.

Note: Calls to or from Birch Gold Group may be monitored or recorded for quality assurance.